ABC Manufacturing Company acquired their property and placed it in service in 2004, with a cost basis of $5,130,154. Wondering if they might improve cash flow and increase depreciation deductions, the company engaged a cost segregation study. Here are the details of their case:
Property
The property at ABC Manufacturing Company encompasses a single-story manufacturing facility and a connected one-story office building totaling about 175,336 square feet, on an 11.73 acre site. The structure is steel-framed, with a metal roof system. The manufacturing facility has a 24-foot eave height, three truck doors, two drive-in doors and power distribution throughout the facility and an electrical motor central center. The location is lit with metal halide main lighting, fluorescent task lighting, and skylights. The space includes restrooms, office space, manufacturing area, and warehouse. The office building includes office suites, an open bull pen area, storage and closets, as well as restrooms and a year-round HVAC system.
Land improvements
Land improvements include asphalt and concrete paving, yard fire hydrants and yard lighting, an exterior break area, concrete curbing, site signage, underground utilities, truck scale, diesel fuel pump, diesel storage tank, site and parking lot lighting.
Cost segregation results
Cost basis: $5,130,154
Cost reallocated: $1,354,369
Reallocation percent: 26.4 percent
First-year deduction: $40,829
Deduction additional years 1-5: $185,368
For a manufacturer like ABC Company, the cost segregation study was a beneficial, profit-boosting experience. Is it time to see if you can recover your capital investment sooner? At CSH we offer a no-fee cost-segregation feasibility discussion, so that you can consider whether a study will benefit you.
Further resources for understanding cost segregation:
